NRL clubs hold firm on News non-compete clause

A group of rugby league clubs are refusing to back down on their demand that Rupert Murdoch’s
News
Ltd sign a non-compete agreement before the independent rugby league commission can be set up.

The April 30 deadline for News Ltd to hand its 50 per cent stake in the NRL to the ARL – which would then set up the commission – came and went amid haggling over the non-compete clause.

The NRL cannot start negotiations for its next five-year television, online and mobile phone rights contract – which some rugby league executives think could fetch more than $1 billion, compared with the $500 million of the current five-year deal – until after the commission is formally established.

Earlier this year some clubs asked News Ltd to sign a 20-year non-compete agreement that would stop it launching a new version of Super League, the breakaway competition that split rugby league in the 1990s and cost News Ltd an estimated $600 million.

That was later increased to five years but the clubs have stuck to their demand for a 20-year agreement, despite the fact that the Australian Competition and Consumer Commission was understood to have contacted the NRL to warn that such a deal could be illegal.

The eight members of the commission, who have all been selected by the ARL, include Leighton Holdings’ chief financial officer
Peter Gregg
, CSR chairman Jeremy Sutcliffe, former Billabong and Qantas chairman
Gary Pemberton
, and former advertising industry executive Ian Elliot.

Sources close to the NRL said the commission could not be set up until the dispute over the non-compete clause was resolved.

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“News Ltd has told the clubs that after spending years trying to get out of rugby league, it isn’t going to return in 10, 20 or 50 years with a new Super League," said one source.

“But some of the clubs want an iron-clad agreement that history won’t repeat itself."

NRL chief executive
David Gallop
had held informal talks with Nine Network and Premier Media Group – the producer of the Fox Sports pay-TV channels and jointly owned by News Ltd and
Consolidated Media Holdings
– over the next five-year contract, which starts in 2013. He had also talked to
Ten Network
and
Seven West Media
.

Nine and Premier pay a combined $100 million a year for the TV rights to the NRL under the existing deal.

Some rugby league officials believe they can easily beat the 60 per cent price increase the AFL achieved in its deal with Seven, Telstra and pay-TV companies Foxtel and Austar United Communications, which takes effect next year.

The AFL’s deal is worth $1.25 billion over five years, compared with $780 million for its current deal.

Last week NRL executives presented three scenarios to a meeting of rugby league club chairmen and chief executives covering TV rights deals worth $1 billion, $1.2 billion and $1.4 billion over five years.

“The only way the NRL could get $1 billion or higher is if there is an illogical bidding war between the TV networks," Peter Horgan, chief executive of media agency OMD, said.

“That won’t happen, unless one of the networks is prepared to lose millions and millions of dollars a year."

But PHD chief executive
Barry O’Brien
said the NRL would achieve a big increase in the value of its TV rights contract, mainly because Nine and Premier were paying “bargain basement prices now".

“There are a couple of things working in the NRL’s favour," he said.

“All three free-to-air [commercial] networks want the NRL rights. Nine needs to keep them or risk a big drop in its ratings in NSW and Queensland.

“Seven wants the State of Origin and Test matches.
Lachlan Murdoch
[Ten’s interim chief executive] and
James Warburton
[who joins Ten as chief executive in early January] are both big rugby league fans and want to add sport to Ten.

“Rugby league is a critical part of Fox Sports’ success in the northern states and Premier knows it will have to pay more to get the rights it wants."